Exploring opportunities, solving challenges and redefining business practices and processes are the normal expectations of the modern procurement department.
The challenges faced in recent years have further demonstrated that there is a strong link between procurement capability, levels of direct expenditure and profit margins.
Leading organisations have embraced and understood how procurement can help define a successful business strategy.
The Private Equity & Procurement Challenge
When do you bring in Procurement expertise? In the recent past reducing costs and working on supply chain and procurement processes was often only prioritised when a portfolio company was not performing as expected.
Cutting costs will typically deliver bottom line savings. Greater savings can be achieved, however, when businesses integrate procurement into day-to-day operations. 3rd Party spend can make up a significant part of an organisation’s costs (up to 60%). Profitability gains through procurement are achievable and should also add additional benefits through service improvements and enhancements.
Procurement improvements can produce rapid, short-term benefits. However, the aim of intelligent procurement is to continue to produce long term value by embedding synergies. Furthermore equipping the procurement team with the tools, knowledge and strategies needed to empower continuous improvement is essential.
An effective procurement function can balance cost optimisation and growth enhancement to deliver increased value to private equity and actively shape a business’s strategic direction and competitive differentiation.
The value of bringing in external experts is proven when companies can accelerate savings opportunities and ensure that in-house staff are trained and coached in best practice. This helps with building understanding. It also creates a culture within the organisation of driving continuous procurement efficiency.
Supplier Relationship Management (SRM) for Growth
When businesses grow rapidly, often as a direct result of investment and acquisitions, supply chains can be overlooked. Supply Chain alignment creates synergies to enhance opportunities for customer satisfaction, business performance, cost reduction and growth. By implementing an effective supplier relationship management programme, it is possible to implement and identify mutually beneficial solutions. These solutions may provide additional competitive advantages which will further elevate their offering from the competition.
The key challenge to this area is selecting the right partner for your business. Building mutually advantageous relationships with key suppliers involves the sharing of information and building trust. This can only be achieved with an effective, measurable SRM strategy that encourages all parties to point out and gain from efficiencies identified and encourages innovation. This is where the implementation of a suitable procurement-led programme can drive real value delivering cost reduction, access to innovation and revenue enhancement.
Engagement with supply chain partners allows businesses to optimise performance, access innovation, provide agility and end-to-end customer service. This can be seen in our recent case studies and has led to a greater value impact on pricing, whilst delivering additional mutual benefits. This is the value of Intelligent Procurement
Failure to invest in supplier relationship management is often due to a lack of resources and understanding of the process involved and the benefits gained. In many cases, companies, particularly mid-size enterprises, underestimate the opportunities that can be found by working with suppliers to uncover synergies .
Investing in relationships with key partners also results in more secure supply chains, mutual gains, innovative developments and sustainable value.
Sharing Procurement Expertise
Here at Ebit we have worked on multiple engagements with PE backed companies to assist them as they continue to grow and add value to their backers portfolio’s. Whether on short term engagements to provide expertise on a single subject or retained engagements as a fully operating procurement service and department we have a proven track record of;
- Identifying opportunities to cut costs
- Improve service offerings
- Provide strategic roadmaps and actionable plans
- Engage stakeholders
- Develop procurement skills and
- Implement software and tools
